This blog is used to post legal tips for businesses and consumers in California as well as commentaries on issues of interest to clients in the San Diego area. For information about our services, please contact us at (619) 448-2129. This publication is NOT INTENDED TO SERVE AS A SUBSTITUTE FOR LEGAL ADVICE. Please consult with a licensed attorney if you require legal advice. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

Thursday, January 31, 2008

What is an Automatic Stay in Bankruptcy?

Question: I lost my job and a creditor is about to get a judgment against me. I've heard that the automatic stay in bankruptcy can help me. What is that?

Answer: The automatic stay is a federal court order that prohibits of any attempts by creditors to contact you or to collect a debt. It goes into effect the moment you bankruptcy petition is filed with the court.

Creditors cannot call you, sue you, garnish your wages, repo your car, foreclose on your house, take money out of your bank account or engage in any other efforts to collect the debt. The automatic stay gives you a little "breathing room" while the court processes your bankruptcy. Some creditors like a home lender might have the right to continue foreclosure on your home if you continue to miss payments, but the lender must file an appropriate motion with the court to get permission before proceeding with the foreclosure.

When your case is over, the automatic stay is lifted. If you receive a discharge, however, that acts as a permanent court order against future efforts to collect a discharged debt.